| Summary of Significant Accounting Policies | 3.
Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP").
The consolidated financial statements include the accounts of the Redwood Green, General Extract and CMI, a variable interest entity
for which the Company is deemed to be the primary beneficiary. All significant intercompany balances and transactions have been
eliminated in consolidation. The Company operates as one segment from its corporate headquarters in Colorado. Use of Estimates The preparation of the Company's
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements
include, but are not limited to determining the fair value of the assets acquired and liabilities assumed in acquisition, determining
the useful lives and potential impairment of long-lived assets and potential impairment of goodwill. The Company bases its estimates
on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under
the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience.
Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. Reclassifications Certain items in the annual consolidated
financial statements were reclassified from prior periods for presentation purposes. Cash and cash equivalents The Company considers all highly liquid
instruments with maturities of three months or less at the time of issuance to be cash equivalents. Concentrations of Credit Risk Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash. Periodically, the Company maintains deposits
in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions
that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed
to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Accounting for Business Combinations
and Acquisitions The Company accounts for acquisitions in
which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is
allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition
date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may
be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to
the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business,
the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the
identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for
transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. Revenue Recognition Under Financial Accounting Standards Board
("FASB") Topic 606, Revenue from Contacts with Customers The Company's revenue consists of
sales of cannabis and ancillary products to both retail consumers and wholesale customers. Revenue for retail customers is recognized
upon completion of the transaction in the point of sale system and satisfaction of the sale by providing the corresponding inventory
at the retail location. Revenue for wholesale customers is recognized upon acceptance of the physical goods and confirmation by
acceptance of the inventory in the regulatory marijuana enforcement tracking reporting compliance ("METRC") system.
Revenue is recognized upon transfer of control of promised products to customers, generally as risk of loss pass, in an amount
that reflects the consideration the Company expects to receive in exchange for those products. Taxes collected from customers,
which are subsequently remitted to governmental authorities, are excluded from revenue. Retail customer loyalty liabilities are
recognized in the period in which they are incurred and will often be retired without being utilized. Shipping and handling costs
are expensed as incurred and are included in cost of sales, which were not material for the year ended December 31, 2019. The Company operates in a highly regulated
environment in which state regulatory approval is required prior to the customer being able to purchase the product, either through
the Colorado Marijuana Enforcement Division for wholesale clients or the Colorado Department of Public Health and Environment for
medical patients. Expenses Cost of Goods Sold, Net of Depreciation
and Amortization Cost of goods sold primarily consisted
of allocated salaries and wages of employees directly related with the production process, allocated depreciation and amortization
directly related to the production process, cultivation supplies, rent and utilities. Operating Expenses Operating expenses encompass personnel
costs, sales and marketing expenses, general and administrative expenses, professional and legal fees and depreciation and amortization
related to the property and equipment and intangibles acquired through the acquisition of CMI. Personnel costs consist primarily
of consulting expense and administrative salaries and wages. Sales and marketing expenses consist primarily of advertising and
marketing, and salaries related to sales and marketing employees. General and administrative expenses are comprised of travel expenses,
accounting expenses, and board fees. Professional services are principally comprised of outside legal and professional fees. Other Expense, net Other expense, net consisted of interest
expense, loss on impairment of goodwill, other income and (loss) gain on foreign exchange. Inventory, net Inventory, net is stated at the lower
of cost or net realizable value. The Company compares the cost of inventory with market value and write down inventories to
net realizable value, if lower. The Company writes down inventory when conditions indicate that the net realizable value may
be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Due to changing
market conditions, management conducted a thorough review of its inventory. As a result, a provision for inventory losses of
$163,800 relating to CBD isolate was charged against operations in 2019 to write down inventory to its net realizable value.
This was based on the Company's best estimates of product sales prices and customer demand patterns. It is at least
reasonably possible that the estimates used by the Company to determine its provision for inventory losses will be materially
different from the actual amounts or results. These differences could result in materially higher than expected inventory
provisions, which could have a materially adverse effect on the Company's results of operations and financial condition
in the near term. Property and Equipment, net Purchase of property and equipment are
recorded at cost. Improvements and replacements of property and equipment are capitalized. Maintenance and repairs that do not
improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their
cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the consolidated statements
of operations. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life
of each asset, as follows:
Estimated Useful Life
Computer equipment 3 - 5 years
Furniture and fixtures 5 - 7 years
Machinery and equipment 5 - 8 years
Leasehold improvements Shorter of lease term or 15 years Goodwill and Intangible Assets Goodwill represents the excess of the purchase
price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed
in a business combination. Intangible assets with finite lives are
recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the
straight-line method. The estimated useful lives of intangible assets are as follows:
Estimated Useful Life
Customer relationships 6 years
Trademark/trade name Indefinite
Developed manufacturing process Indefinite Impairment of Long-Lived Assets and
Indefinite-Lived Intangible Assets The Company reviews its long-lived assets
(property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying
amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount
of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. Goodwill Goodwill and identifiable intangible assets
that have indefinite useful lives are not amortized, but instead are tested annually at December 31 for impairment and upon the
occurrence of certain events or substantive changes in circumstances. We account for the impairment of goodwill
under the provisions of ASU 2011-08 ("ASU 2011-08"), "Intangibles Goodwill and Other (Topic 350): Testing Goodwill
for Impairment." ASU 2011-08 updated the guidance on the periodic testing of goodwill for impairment. The updated guidance
gives companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount. The Company performs impairment testing
for goodwill using a three-step approach. Step "zero" of the annual goodwill impairment test allows for the option
to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount. An entity may choose to perform the qualitative assessment on none, some or all of its reporting
units or an entity may bypass the qualitative assessment for any reporting unit and proceed directly to step "one"
of the quantitative impairment test. If it is determined, on the basis of qualitative factors, that the fair value of a reporting
unit is, more likely than not, less than its carrying value, the quantitative impairment test is required. Step "one"
of the quantitative impairment test compares the net assets of the of the relevant reporting entity to its carrying value. Step
"two" of the quantitative impairment test calculates any goodwill impairment as the difference between the carrying
amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. Indefinite-Lived Intangible Assets Indefinite-lived intangible assets established
in connection with business combinations consist of trademarks, trade names and developed manufacturing processes. The impairment
test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible
asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal
to that excess. At December 31, 2019, management believes
that based upon qualitative factors, no impairment of goodwill or indefinite-lived intangible assets is necessary. Contingencies An initial right-of-use ("ROU")
asset of $1,411,461 was recognized upon the CMI Transaction. The Company adopted ASU Topic 842 January 1, 2019, but had no reportable
operating leases at that point in time. Income Taxes The Company uses the liability method of
accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based
on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to
be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is likely that
the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject
to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance
with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our
policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement
with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less
than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. Comprehensive Loss ASC 220, Comprehensive Income Fair Value Measurements Certain assets and liabilities of the Company
are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable
inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified
and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable
and the last is considered unobservable:
● Level 1 — Quoted prices in active markets for identical assets or liabilities.
● Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
● Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values reported in the consolidated
balance sheets for cash, prepaid expenses, inventories, accounts payable, notes payable, and taxes payable approximate fair values
because of the immediate or short-term maturities of these financial instruments. There were no other assets or liabilities that
require fair value to be recalculated on a recurring basis. Net Loss per Share The Company follows ASC 260, Earnings
Per Share Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement In February 2016, the FASB issued Accounting
Standards Update ("ASU") No. 2016-02, Leases |
